The CAAT Pension Plan achieved an 8.4% return in 2025, as strong stock market performance offset disappointing returns from its private market investments. The Toronto-based pension plan, which serves over 850 employers across 20 industries, saw its assets grow to $25.4 billion, though this fell short of the 11.2% benchmark.
The underperformance was largely attributed to the private equity allocation, which returned just 1.5% against a benchmark of 19.6%, according to CAAT's annual report released Thursday. In contrast, public equity holdings surged 21.7%, while credit and real assets returned 3.7% and 4.1%, respectively.
Private Markets Struggle
Private markets faced constrained liquidity and subdued deal activity in 2025, as higher interest rates and macroeconomic uncertainty dampened investor sentiment and valuations, the pension plan noted. Chief Investment Officer Kevin Fahey, who is also acting CEO, said CAAT is "modestly" exposed to software companies impacted by advancements in artificial intelligence within its private equity and credit holdings, but added that this exposure is not expected to be a "significant headwind" for either portfolio.
Plans for Real Assets
CAAT plans to increase its allocation to real assets this year, as it remains underweight relative to its target mix. Fahey stated, "We have some work to do specifically in that space, and that will come out of a combination of the public equity and fixed income markets." Additionally, a weaker U.S. dollar negatively affected returns, as Canadian pension funds are among the largest holders of U.S. assets globally.
Internal Governance Issues
CAAT has been grappling with internal tensions in recent months. The board of trustees launched an independent review after a controversial payment to the former CEO exposed broader governance concerns. Former CEO Derek Dobson left the fund in March after being placed on leave over a $1.6 million payment for unused vacation time. Three senior executives had approached the board in November with concerns about the payout and a relationship between Dobson and another employee.
Fahey was appointed acting CEO following Dobson's departure. The board is now focused on appointing a permanent CEO, according to the annual report. "CAAT's independent governance review is now in its final stages," the pension plan said in a statement. Fahey expressed confidence in maintaining a long-term focus for members, stating, "We're going to do a good job setting up our next CEO for success."
